Bitcoin mining difficulty continues to set records without any indication of slowing down

The measure of how easily miners can find a block of bitcoin, known as the bitcoin mining difficulty, is expected to exceed the 50T mark on Wednesday, setting a new all-time high. This rise in difficulty may continue as a result of the rally in bitcoin prices this year and the increased popularity of the Ordinals protocol, which has led to better profitability for miners. Miners are deploying more mining machines to the network, resulting in more computing power and record difficulty levels.

The difficulty adjusts automatically as more computing power or hashrate is added to the network in order to keep the time required to mine a block stable at about 10 minutes. Ethan Vera, the COO at Luxor Technologies, says that new-generation machines will continue to be added as rack space becomes available. The popularity of the Ordinals protocol has led to transaction fees three times higher than normal, adding to miners’ revenue. Ordinals allow for additional functionality on the bitcoin blockchain, such as non-fungible tokens and other coins, which increase the number of transactions, making mining a block more profitable.

An increase in difficulty means a decline in profitability for miners. Marathon Digital Holdings and Canadian miner Bitfarms both noted lower monthly mined bitcoin as difficulty rose in April, resulting in a loss for Bitfarms’ fourth quarter. However, a few events could dampen the growth of the hashrate, such as a lack of positive bitcoin price movement, constraints in available infrastructure, or uncertainty around the next Bitcoin halving event.

Foundry, owned by CoinDesk’s parent company, Digital Currency Group, suggests that having too much hashrate in one region could also affect the growth of the bitcoin mining difficulty as it may change how mining rigs are deployed. Colin Harper, head of content and research at Luxor Technologies, notes that the concentration of hashrate in North America has led to new seasonal trends. Previously, the hashrate would increase during China’s rainy season, when cheap hydropower was plentiful. Instead, now, when summer heatwaves sweep through the U.S., miners power off their machines to save the energy required for cooling.

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Edited by Aoyon Ashraf.

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